The Hard v. Soft Landing Debate

Making a slow return to actually reading the news, I enjoyed coming across this week’s Econoblog , which revists the hot topic of 2004: whether the world’s financial imbalances will be corrected via a hard or soft landing. Nouriel Roubini and David Altig discuss the modest revaluation of the yuan that we’ve seen over the past year, and the prospects for more of the same.

For my money, however, the most interesting line in their exchange came right at the end. David wrote:

I have to say that my opinions have not much changed since Nouriel and I first debated the hard-landing/soft-landing scenarios back in March 2005. True, we are further on up the road, with scant movement toward the rebalancing of trade and capital flows that both of us agreed would have to occur at some point. That might be troubling, but the tipping point just does not feel like it is creeping any closer.

David makes a fair point – and I agree with him that it does not feel like we’re getting closer to some sort of crisis. However, I also must wonder this: what should we expect it to feel like?